A monthly survey of 12 UK-based investment managers found the average allocation to equities in global balanced portfolios increased half a percentage point to 54.3 percent, the highest since September 2014.

The increase came largely at the expense of cash, which is typically used as a safe haven when investors expect asset markets to become volatile. Cash allocations fell to 7.5 percent from 8.4 percent in February.

The European Central Bank is seeking to boost a sluggish euro zone economy with an asset purchase programme similar to measures implemented by the United States after the 2008-9 financial crisis and known as quantitative easing or QE.

"The ECB's decision to adopt QE is having very significant effects," said Standard Life Investments.

"European equities are one of the asset classes which we are overweight in, reflecting our expectation that QE will force the euro currency lower, which supports European exporters and helps sustain company profits."

But Standard Life warned the measures are causing distortions to build up in the financial system, in particular by forcing down bond yields, sometimes into negative territory.

"This causes a range of problems: it discourages governments from pressing ahead with structural reforms, it places great pressure on European insurers who have sold guaranteed products, and it distorts even more the normal savings and investment decisions by European companies and households," it said.

The average allocation to bonds by British investors also rose slightly, to 24.2 percent from 23.7 percent, while exposure to property was raised to 4.1 percent from 3.9 percent.

Investors said that if U.S. Federal Reserve, which is seeking to draw its ultra-easy policy to a close later this year, were to mis-time its decision on when to start raising rates, it would cause a market upset.

"The most risk could come from the Federal Reserve Bank if they are indeed behind the curve and find that interest rates might need to rise quicker that the market is anticipating," chief investment officer at Investment Quorum Peter Lowman said.

A disruption to the recent recovery in U.S. economic growth would also have a significant knock-on effect on global markets, said Rob Pemberton, investment director at wealth management firm HFM Columbus.

"With equity valuations expensive, bond yields virtually at historic lows and the U.S. about to begin tightening monetary policy, we could see both bond and equity prices falling sharply simultaneously in the U.S., something we haven't seen for many years," he added.

(Editing by Catherine Evans)

By Chris Vellacott